1. A common issue is involved in these seven appeals and they relate to the same appellants. They are, therefore, disposed of by this common order.
2. The dispute relates to Mineral Turpentine Oil removed in bulk on payment of duty from: both belonging to the appellants. A part of the production was stock transferred to Paharpur and Budge Budge filling stations after payment of duty. At these filling stations, the goods were packed in containers and sold to: (1) Directorate General of Supplies and Disposal in the appellants' containers at Rate Contract Price which included the cost of the container; and (2) Non-Directorate General of Supplies and Disposal parties in customer's containers.
3. The case of the department is that since all the four installations - Haldia Refinery, Mourigram Bonded warehouse, Paharpur Filling Station and Budge Budge Filling Station - belonged to the appellants, the packed sales to D.G.S.&D., ex-Paharpur and Ex-Budge Budge should pay duty at the higher price relating to the packed goods. Since the packed goods had, at the time of stock transfer in bulk from Haldia and Mourigram, paid duty only at the bulk sale price, differential duty was demanded from the appellants. Further, on the charge that the appellants had suppressed their filling activity at Paharpur and Budge Budge, the Collector imposed penalty of Rs. 50,000/- on the appellants.
4. We have heard both sides and have carefully considered their submissions and the record. We observe that under the Central Excise Law the only two ways by which bulk goods cleared on payment of duty could be subjected to duty given again are: (1) The subsequent activity on the goods should result in the emergence of a commercially new product, so as to attract a fresh charge under Section 3 of the Central Excises and Salt Act, 1944 on account of new goods having been "produced or manufactured".
(2) The law should provide for charge of duty at the time and place of actual sale of the goods.
We find that neither of these two things happens in the present case.
Ail that is done at Paharpur and Budge ' Budge is that the goods received in bulk are filled in containers. After such filling or packing, Mineral Turpentine Oil remains Mineral Turpentine Oil only. No new or different goods come into existence. Applying the ratio of the Supreme Court judgment in Delhi Cloth & General Mills Company Limited case 1977 E.L.T. (J.199), reiterated in the more recent judgment of the Supreme Court in Empire Industries case 1985 (20) E.L.T. 179 (S.C.), it cannot be said that any manufacture or production had taken place at Paharpur and Budge Budge.
5. Though actually no new goods emerged after the process, the law could yet provide for the process of filling or packing to be deemed as manufacture. Such deeming provisions exist in Section 2(f) of the Act but they applied to manufactured tobacco, patent or proprietary medicines and cosmetics. They do not apply to Mineral Turpentine Oil.
The process of filling or packing of duty paid Mineral Turpentine Oil at Paharpur or Budge Budge cannot, therefore, be treated even as deemed manufacture.
6. It is not possible either to say that the nature of the article was such that without filling or packing it was not at all marketable and it, therefore, became marketable goods only after filling or packing.
This was because substantial quantities of Mineral Turpentine Oil are actually sold in bulk ex-Haldia and Ex-Mourigram Bonded Installation.
The commodity is, therefore, marketable goods even in bulk condition.
7. The second alternative in paragraph '4' above is also not available since Section 4 of the Act requires the goods to be valued for purposes of assessment "at the time and place of removal" and not at the time and place of actual sale. "Place of removal" has been defined in Section 4(4)(b) of the Act, which reads as under: (i) a factory or any other place or premises of production or manufacture of the excisable goods; or (ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty, from where such goods are removed".
In the present case, Haldia Refinery of the appellants is a factory and their Mourigram Bonded Installation is a warehouse. They, therefore, constitute the place of removal. The filling stations at Paharpur and Budge Budge are neither a factory (because no manufacture or production takes place there) nor were they licenced as a bonded warehouse. In terms of the provisions of Section 4 of the Act read with Rules 9, 49, 157 and 173N of the Central Excise Rules, 1944, valuation and assessment has to take place at the time of removal of the goods from Haldia Refinery and Mourigram warehouse. The goods were already so valued and assessed to duty. From these two places, all clearances were in bulk, whether for sale or for stock transfer. Since Mineral Turpentine Oil was sold in bulk from Haldia Refinery and Mourigram warehouse, the normal price "at which such goods are ordinarily sold" was ascertainable at the gate of the factory/warehouse. So, the quantity stock transferred from these places in bulk to Paharpur and Budge Budge had also to be assessed at the same normal price, vide Section 4(1)(a) of the Act.
8. Since the goods are to be valued and assessed to duty at the time and place of removal, as defined in the Act, it follows that they have to be so valued and assessed in the condition in which they are at the time and place of removal. The learned representative of the department invited our attention to Section 4(4)(d)(i) of the Act, which reads as under: (i) where the goods are delivered at the time of removal in a packed condition, includes the cost of such packing except the cost of the packing which is of a durable nature and is returnable by the buyer to the assessee".
The learned representative of the department contended that since the containers, though durable, were not returnable to the appellants, the cost of packing had to be added to the quantity of Mineral Turpentine Oil sold after packing at Paharpur and Budge Budge. He referred to the catena of case law on the point that packing charges were an element of cost to be included in the assessable value of the goods. We find that the argument of the department is misconceived. Section 4(4)(d)(i) itself says in so many words that its provision applies to cases "where the goods are delivered at the time of removal in a packed condition".
In the case before us, the goods were, at the time of their removal from Haldia Refinery and Mourigram warehouse, in bulk condition and not in packed condition. Section 4(4)(d)(i) of the Act is, therefore, inapplicable to them.
9. It is not possible to think of any other basis at which the stock transfer quantity should be assessed at Haldia Refinery and Mourigram warehouse. Indeed, at the time of bulk removal from these places, it would be impossible to know as to how much of the quantity would eventually be sold to D.G.S.& D in appellants' containers.
10. Since the law requires the bulk removals, whether for sale or for stock transfer, ex-Haldia Refinery and ex-Mourigram warehouse, to be valued and assessed to duty at the bulk sale price which was ascertainable and the appellants did declare such a price and, after approval by the department, assessed the goods accordingly, they were not guilty of any suppression or misdeclaration. The filling or packing activity on duty paid goods at Paharpur and Budge Budge did not amount to manufacture or production of any new commercial product. Hence, there was no liability on the part of the appellants to declare the said activity to the department or to pay any differential duty. They have not violated any provision of the Act or the rules. We, therefore, set aside the demands for differential duty made on them, and also the penalty imposed on them.
11. Accordingly, we allow all the seven appeals with consequential relief to the appellants.
(a) excise is not a duty on sale. The price at which excisable goods are sold becomes relevant only for the determination of their assessable value, where the duty is levied on an ad valorem basis; (b) in terms of S.4(1)(a) of the Act, the assessable value is deemed to be the normal price at which such goods are sold "at the time and place of removal". Accordingly, R.9 of the Rules prescribes synchronisation of payment of duty with the time of removal from any place where the goods are cured, produced or manufactured; (c) the "place of removal" has itself been defined in S.4(4)(b) to mean - (i) a factory or any other place or premises of production or manufacture of the excisable goods, or (ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty, from where such goods are removed; (d) (i) the depots at Paharpur and Budge Budge, obviously, are not warehouses or premises where the excisable goods were permitted to be deposited without payment of duty, in the facts and circumstances of the case.
(ii) they cannot also qualify to be places of production or manufacture, unless packing, per se, is held to be "manufacture", (iii)"manufacture", in terms of S.2(f) of the Act, includes any process incidental or ancillary to the completion of the manufactured product, as well as, packing or re-packing from oulk in the case of some specified products only like manufactured tobacco or patent or proprietory medicines. The goods, in question, are not amongst those specified, (iv) it cannot be held that packing was incidental or ancillary to the completion of the manufactured product seeing that the goods were assessed to duty on removal in bulk as completely manufactured products at Haldia and Maurigram. Nor can packing be considered as inherent in manufacture unless "it enters into the character" of the assessable goods [Para 53 of the report in 1983 ELT 1896 - Union of India-V.' Bombay Tyres]. The goods are capable of being sold and are, indeed, sold at Haldia and Maurigram in bulk, and, accordingly, packing does not enter into their character at all, (v) in any view, therefore, mere packing or re-packing from bulk is neither "manufacture" nor are the depots at Paharpur and Budge Budge places of removal, in regard to the goods in question; (e) once this was so, the goods sold in packing from Paharpur or Budge Budge were not assessable to duty and the assessee was under no obligation to have disclosed this on pain of being held guilty of fraud, collusion or any wilful misstatement or suppression of facts, so as to avail the larger period of limitation prescribed in Rule 10. That the goods were sold after packing at Paharpur or Budge, Budge could have been easily ascertained on enquiry and there was never any active concealment. Nor was the requisite intention to evade payment of duty proved, even if the appellant could have contravened any Rule. There was, indeed, no removal of manufactured goods from the place of manufacture without payment of duty. The penalty, if any, imposed under either R.9 or 173Q was as unjustified as was the demand for payment of differential duty.